Auto Auctions a Viable - and Under Used - Tool for Credit Unions to Get Highest Value For Repossessed Vehicles

ATLANTA – When most people think of auctions, words like antiques, valuable paintings and Sotheby’s are some of the more popular connotations. But the same benefits of auctions for items like these such as critical mass of buyers and sellers are also enjoyed at auto auctions, and it’s one of the reasons the auto remarketing system is becoming an increasingly popular way for businesses and dealerships to facilitate the exchange of used vehicles and used vehicle information. National Auto Auction Association data show auction volume reached a record 9.6 million in 2002. Where did those vehicles come from? Dealers are the number one source – about 39.4%. Their vehicles include those they receive in trade but aren’t needed or don’t fit in with inventory, or vehicles that are too old than the dealer’s set stocking policy; 38.5% are from lease/fleet/ or repossessed vehicles; 19.3% come from manufacturers (every year automakers remarket 1.3 million vehicles, almost all of which are less than a year old); .6% from salvage/insurance (rental companies send more than 40% of their risk vehicles to auction); and 2.2% come from other sources such as financial institutions. Here’s another interesting statistic: 35% of a franchised dealer’s used vehicle inventory – and 30% of an independent dealer’s used vehicle inventory – are derived from auctions, according to CNW Marketing/Research, which also shows that a record number of 43 million used vehicles were sold in 2002,. “A lot of credit unions aren’t aware they can sell their repossessed vehicles through an auction,” said John Schrock, national account directors for Manheim Auctions, the world’s largest and highest volume wholesale automobile auction company. The company expects to sell more than 16,000 vehicles for credit unions in 2003. “Going to an auction for the first time can understandably be intimidating and mystifying. A lot of credit unions when they repossess vehicles sell it off their lots because they think they’ll get more money if they sell it retail rather than wholesale. But auctions are not only the fastest way to turn repossessed vehicles in to cash, they can also get the seller the best price for the vehicle because you have a situation where there are thousands of dealers bidding on vehicles, and that drives the prices up,” Schrock added. Last year alone, Manheim Auctions sold 5.1 million used vehicles in 86 auctions it held in 2002, all but two of which were held in North America and the remainder in Canada. The Atlanta, Ga.-based company which has been in business since 1945, typically holds open sales auctions once a week which dealerships are invited to – the company has relationships with over 60,000 franchise and independent dealers. Occasionally the company also holds a factory sale. Manheim also holds simulcast transmission at 61 of its auctions that allows a dealer in another state to call in to an auction and bid on a vehicle. Of all the vehicles Manheim sells in a typical year, approximately 20% of them are factory cars that have been in rental service for about a year; 40% are fleet lease that include a mix of retail and leased vehicles in the 3 to 5-year age range; the remaining 40% are dealer consignment vehicles that dealers bring to auctions and can include anything from a trade-in or new vehicle, to a 10-12 year old car. He referred to an auction as being “the stock exchange of the used vehicle market. The frenzy is very much like what you find on the floor of the New York Stock Exchange. It’s like watching a course in free market 101 between a buyer and seller.” According to Manheim’s statistics, the retail value of used vehicle transactions in 2002 was more than $370 billion. A record 43 million units were retailed last year. Where are all those used vehicles going? According to the U.S. Department of Transportation, the number of cars per household has been steadily increasing for the past several years. Two-income households, driving-age children, as well as the growth in ownership of special purpose vehicles for work or recreational needs, have pushed this trend. Auto auctions can not only move large volumes of vehicles without depressing prices, most auctions also have state-of-the art reconditioning facilities that allow the seller to maximize the total return on their investment. Manheim, for example, owns Dent Wizard’s paintless dent removal (PDR) system. “Depending on the year of the vehicle, it might just need a wash and vacuum. Other vehicles need complete detailing including paintless dent repair or other paint and bodywork,” Schrock explained. “Our role as the auctioneer is to facilitate the sale of the vehicle and do whatever is necessary to maximize the value of a vehicle. The condition of the vehicle is usually the overriding factor in determining the price that a vehicle will fetch in the auction lanes. ” Manheim, he said, is considering developing a credit union lane at its auctions in 2004. The tentative plan is to identify at auctions held the first and third week of each month, a lane just of vehicles being auctioned for credit unions. “ This will give us a way to market credit union vehicles together and will let the dealer recognize the quality of cars from credit unions,” said Schrock. Before that can happen, he admitted that “the biggest problem we’ve had with credit unions is them getting their vehicles to us for auctions. That could wind up being very expensive,” he said. To address that problem, Manheim encourages credit unions to use the company’s service organization, Manheim Remarketing Solutions which includes a nationwide network of 500 repossession agents. When a vehicle is repossessed, Manheim Remarketing Solutions can deliver it to an agent within 50 miles of a credit union site. The service organization also has titling experts and document specialists that can provide a credit union with information on the market value of the vehicle and what the credit union should expect to receive for it at the auction. “An auction is a very fast-paced activity,” said Schrock. “At a manufacturers sale, around two cars are auctioned off in a minute, and at a fleet/least sale, we typically do 75-90 an hour. Repossessing vehicles is part of auto lending, and auto auctions are a great vehicle for credit unions to use to maximize the value of vehicles they’ve had to repossess.” -